Event: On the evening of January 29, the company announced the 2023 annual results pre-profit announcement. According to preliminary estimates by the company's finance department, it is expected to achieve net profit of 110-16 million yuan, deducting non-net profit of 200,000 to 3.2 million yuan in 2023. In 2022, the company will achieve net profit to mother - 82.75 million yuan, after deducting non-net profit - 115.98 million yuan. The company will achieve full year results and turn a loss into a profit.

As a result of full-platform R&D, it is expected to turn a loss into a profit in 2023. With 2023Q4, the company expects to achieve net profit of 7,647.46-8,14746 million yuan, an increase of 8748.11%-9326.62% over the previous year, reversing the loss year on year; deducting non-net profit of 6,012.42-63.1242 million yuan, an increase of 1376.38% - 1450.05% month-on-month, reversing the loss year on year. Based on smart security, the company pioneered two new fields of consumer electronics and automotive electronics, and obtained good market feedback and customer recognition, forming a pattern of joint development of the three major businesses. Throughout 2023, the company's new business revenue grew rapidly, helping to turn net profit from a loss into a profit. (1) In the consumer electronics sector, cooperation between the company and existing customers in the field of middle- and low-end products continues to increase, and the market share continues to increase; at the same time, mass production and shipment of high-end 50 megapixel products are smooth. These products are mainly used in high-end flagship mobile phones, such as main cameras, wide-angle, telephoto cameras, etc., and the unit price is high, opening up a second growth curve for the company's revenue in the consumer electronics sector. (2) In the field of smart security applied to machine vision, the company released a number of professional-grade CIS products, and the continuous expansion of the product matrix supports a strong growth trend in the company's machine vision business.

New high-end CIS chip products have been introduced repeatedly, giving sufficient impetus to the long-term growth of the company's mobile phone business. Smartphones are the largest downstream application area in the CIS, accounting for more than 70%. The CIS smartphone business will bring a solid growth impetus to the company. On the technical side, the company has accumulated SFCPixel in the CIS smartphone? Advanced technologies such as patented technology and PDAF technology, dark light performance and HDR applied to security can be superimposed on smartphones across fields. In terms of products, the company has developed and mass-produced various series of 200-16 megapixel products, and launched two new 50 megapixel ultra-high resolution CIS products with different performance. On the customer side, the company's entry-level products have been shipped on a large scale at mainstream mobile phone brands such as Samsung, Xiaomi, Lenovo, and Honor, while high-end flagship 50 megapixel products have also begun to cooperate with related brand manufacturers, and mass production and shipment have been smooth.

Machine vision products are positioned as high-end, and global shutter technology breaks through leading industries. The company's shipment volume of security CIS reached 146 million units in 2020, ranking first in the world. It has launched a 1-8 megapixel multi-scene, medium and low-end full-coverage product matrix. The stacked GS products developed and launched by the company based on unique BSI technology have the characteristics of high sensitivity, high quantum efficiency, and low noise. While combining the advantages of CMOS and global shutter, they also solve the technical problems of HDR under a global shutter, and achieve a single-frame HDR function. With years of accumulation in the security field, the company has formed good cooperative relationships with leading security industry customers such as Dahua Co., Ltd., Hikvision, and Fluorite Network.

Investment advice: We are optimistic about the company's leading position in the CIS security field, the positive progress it has made in expanding the consumer electronics and automotive electronics fields, and the continuous growth performance. The company is expected to achieve revenue of 28.65/42.51/5.638 billion yuan in 23-25 years, and achieve net profit of 0.13/2.94 billion yuan. With a market value corresponding to January 29, PE is 1374/62/37 times, respectively, maintaining a “buy” rating.

Risk warning: Risk that the recovery of the security industry will not meet expectations; risk of technology iteration; risk of increased competition.